Sustainability, Energy Transition, ESG

There Can Be Only One (or Two) – Not Every Car Can Be a Highlander
June 21, 2024
Companies Mentioned:
Tesla, BYD, Rivian, Fisker, Hertz, Trina Solar, Canadian Solar, Fulcrum BioEnergy, Corteva
Commodities Mentioned:
EVs, Corn, Soy, Biofuels, Ethanol, SAF, Hydrogen
Subjects Covered:
Recycling, Renewables, Carbon Capture, Emissions, New Energy, Hydrogen, ESG Investing, Climate Litigation, Clean Fuels

C-MACC Weekly Sustainability and Energy Transition Report

There Can Be Only One (or Two) – Not Every Car Can Be a Highlander

  • Topic of the Week: High-dollar consumer durables like autos are profitable only when they achieve economies of scale, and the new entrants in the EV space are competing with companies that have developed economies of scale over decades, except for Tesla and BYD, who had first mover advantage. We expect other new EV entrants to fail – maybe all of them!
  • Making matters more challenging, Chinese deflation around auto and battery components makes it easier for automakers to overcome tariff increases. The lower cost of the entire supply chain in China will be challenging for the West to keep pace with.
  • Otherwise: We question again how a low carbon price will impact European progress, we discuss further economic roadblocks for renewable fuels, bankruptcy, and margin declines, and we look at the increasing politicized rhetoric around current ESG investing, an investment process which in our view contributes nothing to sustainability goals.

Exhibit 1: Like many sustainability initiatives, scale is necessary for EVs, and getting to scale is a pathway filled with execution risk and expense.

Source: Capital IQ, C-MACC Analysis, June 2024

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